Hundreds of businesses are under pressure to cut their costs by up to 15 per cent if they want to retain valuable Birmingham City Council contracts.
In an unprecedented “share our pain” move, the finance cabinet member is urging the council’s 900 main suppliers to slash prices.
Randal Brew insisted he had no alternative but to find ways of reducing the city’s £1 billion annual procurement bill after the Government signalled public spending cuts in Birmingham of about £330 million over the next four years.
Coun Brew (Con Northfield) has written to chief executives and managing directors across Birmingham and nationally asking them to consider delivering the same goods and services for a reduced price, and is offering businesses the chance to discuss cost-cutting measures with his staff.
He ended the letter with a plea for the business sector and the council to work together “to protect the interests of Birmingham and its citizens”.
But the request infuriated the Birmingham Chamber of Commerce, which warned some firms might see the letter as a “threat”.
Chamber sources indicated that Coun Brew’s blunt approach was bound to raise doubts about the feasibility of a proposed Birminhgham-Solihull Local Enterprise Partnership, which the Government is insisting must be led by businesses rather than councils.
The Federation of Small Businesses said the letter smacked of “strong-arm tactics” by the council. Coun Brew’s decision to issue an emergency cost-cutting plea came as a surprise to business leaders who have been promoting the LEP.
In his letter, the cabinet member wrote: “At Birmingham City Council we are conducting an in-depth review of our current cost structure in order to determine how best we can protect local front-line services.
“A major element of our cost structure is what we pay to suppliers for goods and services used in that delivery.
“At a time when we are obliged to manage within an environment of limited financial resources, I am asking you as a valued current supplier to review the level of your charges for goods and services to the city council. I hope to see each supplier offering to reduce costs by between 10 and 15 per cent.”
Coun Brew wants firms to meet council procurement officers to find ways of reducing “waste and inefficiencies”. It is clear from the letter that the cabinet member is expecting a backlash from businesses.
Coun Brew said: “I know this will not be welcome news, but I believe it is a realistic expectation in the current economic and fiscal climate.
"Whilst I realise the difficulties of such a request, I think that this is reasonable in the context of the level of savings being required elsewhere in the public sector, and one which will assist in our continuing efficient procurement processes.”
Defending his decision, Coun Brew said: “I have had many positive responses from suppliers keen to explore ways they can work with us.”
Chamber of Commerce spokesman John Lamb said scores of businesses in Birmingham had contracts with the city council.
Mr Lamb added: “Firms that have worked with the city council for some time might think that this is a bit of a threat. They will have to look to see if they can afford to cut prices so drastically, I am sure they wouldn’t want to lose the council’s business but with pressure like this that is something they might have to consider.”
Federation of Small Businesses Birmingham spokeswoman Denise Craig said: “We take a fairly dim view of something like this.
“Most small business already offer extremely competitive prices to local councils. The council should be using small businesses and micro businesses more often in order to make sure taxpayers’ money stays in Birmingham.
“We certainly wouldn’t want to see strong-arm tactics or veiled threats.”